Twitter Acquisition Cancellation, It Makes Elon Musk Richer, Here's The Cause!

JAKARTA - Elon Musk's bid to cancel his purchase of Twitter Inc could leave the world's richest man in a stronger financial position than before he launched his $44 billion deal. The Tesla CEO now retains the billions of dollars in cash from the sale of Tesla stock which he now holds in the bank.

After Musk on Friday, July 8, canceled his April 25 agreement to buy the social media platform, Twitter vowed to force him to make the acquisition. Now, both sides face a potentially drawn-out legal battle that could still cost Musk billions of dollars.

Whatever the outcome, the Tesla CEO, for now, appears to have raised about $8.5 billion in cash raised from selling Tesla shares in late April to finance the Twitter acquisition. In the last week of April, Musk sold 9.6 million Tesla shares at an average price of about $885 per share.

"He's almost certainly in a better cash position now than he was last year because he's sold so much of Tesla stock, especially at a fairly high price," said Guidehouse Insights analyst Sam Abuelsamid.

"However, depending on what the final outcome of the litigation surrounding this is, he could end up in a much worse situation (if he loses)," Abuelsamid added, as quoted by Reuters.

If Musk loses his legal battle against Twitter and is forced to complete the acquisition or pay a hefty fine, then he may have to sell more Tesla stock. "This is clearly frightening to investors and undermines the residual value of its Tesla stock," said Abuelsamid.

Tesla shares slumped 6.5% on Monday, July 11. Following the sale of his shares in April, Musk tweeted, that "no further TSLA sales are planned."

Brian Quinn, a professor at Boston College Law School, said he wouldn't be surprised if Musk and Twitter ended up agreeing on more than $1 billion in compensation for Twitter.

"For his part, Musk will be poorer, but also not stuck with owning the company," Quinn said.

By the time Musk sold his stake in April, Tesla investors were concerned that buying Twitter could be a distraction for Musk while Tesla faced growing concerns about the state of the world economy and increasing competition from competitors. But while the sale of CEO shares usually makes investors nervous, the deal with Twitter provides a plausible explanation for Musk to reduce his large stake in Tesla.

In December, Musk cited looming options and tax payments for the sale of more than $16 billion in Tesla stock.

Since selling Tesla stock in April, it has plunged 19%, with it and other growth stocks hit by investor concerns about inflation and a potential recession. If Musk hadn't sold the Tesla stock, it would now have lost nearly $1.6 billion in value.

It's unclear how much income tax Musk will be able to pay on the proceeds from the sale of his Tesla stock.

Musk hasn't received a salary from Tesla so far, but instead earned billions of dollars worth of stock options after hitting several stock and performance targets in recent years. He still owns about 16% of Tesla's shares, worth around 115 billion (IDR 1.722 trillion).

Musk had not done well with the Twitter stock he bought before announcing he would acquire the company. Musk bought 73 million Twitter shares for $2.64 billion through January to April, at an average price of around $36 per share. Twitter shares fell 9.5 percent to 33.50 dollars on Monday. At that price, the value of his Twitter stock has fallen by about $200 million.